The second bucket is to take care of all of the things that can go wrong. This is the “contingency” or “risk” bucket. This bucket is “just-in-case” you get sick, just-in-case you need a new roof, and/or just-in-case something bad happens to you or the assets in your first bucket. And whether you are planning for this bucket along the way or not, you’ve still got it.
If you are ignoring the risks that we all face, you are self-insuring and thereby potentially placing the assets in the other two buckets at risk. That’s OK, you just need to understand the potential consequences and make informed decisions for yourself. And once the second bucket is totally full, this doesn’t mean that it can’t be optimized.
Within either of these first two buckets, there are strategies that might help you improve or optimize what you are trying to accomplish. By doing the things that you can do to make it more efficient within each bucket, this will typically free up assets for other use. If there is one dollar left over, no matter what that asset is… by definition that is a “custodial” asset.
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